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LEAD: Firms face growing difficulties in raising capital: BOJ's Shirakawa+
(Japan Economic Newswire Via Acquire Media NewsEdge) FUKUOKA, Dec. 1_(Kyodo) _ (EDS: COMPILING STORY HEDLINED 'BOJ MAY SOON HOLD EXTRA MEETING TO FACILITATE FIRMS' FINANCING.' ADDING INFO, COMMENT. 2ND LEAD TO FOLLOW AFTER SHIRAKAWA'S PRESS CONFERENCE)
The ongoing global financial turmoil has made it increasingly difficult for Japanese firms to raise necessary operating capital and the Bank of Japan aims to take every possible measure to address the problem, BOJ Governor Masaaki Shirakawa said Monday.
Separately, sources close to the central bank said the BOJ is planning to hold an extraordinary Policy Board meeting by the end of this week in an attempt to help support corporate finance to cover the approaching end of the year and fiscal 2008 through next March.
Delivering a speech at a meeting with local business leaders in the Kyushu region, Shirakawa said interest rates on corporate debt and commercial paper, or short-term debt issued by companies, have been sharply rising as investors as well as lenders have become risk-averse amid the worldwide credit turmoil.
"Financial conditions are currently becoming less accommodative mainly in terms of funds availability," he said, adding that "the risk that the effects of the (BOJ's) current low (policy) interest rates may not permeate through the economy is increasing."
The comments came after Shirakawa's recent remarks referring to the adverse impact on the functioning of the market mechanism and indicated the BOJ is not considering additional interest rate cuts in the near future.
In October, the BOJ lowered its benchmark rate to 0.3 percent from 0.5 percent, the bank's first rate cut in over seven years. But it held the target rate for unsecured overnight call money steady at the policy meeting last month.
Shirakawa said funds became less available for companies especially after U.S. investment bank Lehman Brothers Holdings Inc. went bankrupt in September, accelerating the financial crisis stemming from U.S. subprime mortgage problems.
The outstanding amount of CP issued in Japan, which had increased by about 10 percent every year until the Lehman crush, recently declined sharply, the BOJ said. More companies have postponed their bond issuance, given soaring credit costs.
"Under these circumstances, it seems that firms' attitudes are becoming increasingly defensive against the backdrop of the deceleration in global economic growth and the turmoil in financial markets," Shirakawa told business leaders.
Also Monday, the sources close to the BOJ said the bank is finalizing some measures to support corporate fund-raising.
Among the envisaged measures is the reintroduction of an emergency lending facility for financial institutions designed to ease the credit crunch. The BOJ once launched the method in 1998 in the wake of a bad-loan crisis among Japanese lenders, they said.
The BOJ is also considering the more flexible use of its fund-supply operations in financial markets, including the purchase of CP under repurchase agreements.
Shirakawa said last month he had instructed BOJ officials to study whether the bank could accept a wider range of collaterals while lending to financial institutions, such as CP and lower-graded corporate bonds that it currently does not accept.
Copyright ? 2008 Kyodo News International, Inc.
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